Oil-boom wealth a mixed blessing for Eagle Ford’s school districts

By Lindsay Kastner
San Antonio Express-News

Million-dollar homes and leafy boulevards once were the surest sign that you lived in a rich Texas school district.

Now add drilling rigs, dusty roads and overnight trailer parks.

This year, eight rural districts flush with money from the Eagle Ford Shale energy boom were added to the “wealthy” category for the first time, meaning they might have to give up some of their local property tax revenue.

“I’ve lived here for 40 years, and we’ve been poor for 38 of those years,” Carrizo Springs ISD Superintendent Deborah Dobie said.

About a third of the 23 districts the Texas Education Agency added to its annual list of property-wealthy districts are on the Eagle Ford, an oil-and-gas-rich shale formation stretching through a dozen counties south and east of San Antonio.

A new extraction technique called hydraulic fracturing has amped up the region’s economy — and drastically altered its tax base, thanks in large part to taxable mineral rights.

In two years, Dobie said, property values in her district have increased from $441 million to almost $2.5 billion.

Under the Texas system of sharing rich districts’ tax money with poor ones to help balance disparities in funding, she expects to deliver $8 million or $9 million to the state next year, based on this year’s property values.

Next door in tiny Cotulla Independent School District, at the epicenter of the Eagle Ford activity, property values have shot up from $534 million in 2010 to $2.3 billion this year.

It’s more than enough to propel the 1,200-student district into the ranks of the property wealthy, according to a state formula that factors in student attendance.

But Cotulla Superintendent Jack Seals said the district’s windfall isn’t worry-free.

An influx of oilfield workers has squeezed the housing market, and three school employees, including the district’s technology director, now live in trailers on district property.

And even with higher tax revenues, the district can’t afford to pay prevailing boomtown wages, so hiring in-demand workers such as custodians and cafeteria employees has been tough.

“It’s really hard to try to compete with the private sector at this time because the oil field wages are skewing the competition rate,” Seals said.

This year, the district expects to return about $900,000 to the state in what is known as a recapture payment.

“Next year is when the recapture is going to hit us like a hammer,” said Seals, who expects to dip into the district’s savings to send the state a payment as high as $15 million in 2013.

School districts such as Cotulla are pulling in local tax revenue like never before, but state funding is based largely on 2006 revenue figures, and much of the new increase is subject to recapture.

“If (property values) flatten out at $2.3 billion, we’re going to have less than we do now to run our schools,” Seals said.

Like many districts on the Eagle Ford Shale, Cotulla has joined a lawsuit against the state over education funding, organized by the Equity Center, which traditionally advocates for poorer districts.

Wayne Pierce, executive director of the Equity Center, said scenarios such as the one Seals described mean that newly wealthy districts are “still in the boat with the property-poor districts.”

Another issue comes from fluctuating property values, said Dan Casey, a partner with school finance experts Moak, Casey and Associates. Because the state uses prior-year values to determine the amount wealthy districts are required to return, property values can plummet but districts still will be on the hook for such payments.

“The main problem you get is these guys that shoot right up and then shoot back down,” he said. “As a result, you tend to get hit harder with recapture costs.”

Not all property-wealthy districts are subject to recapture because the formula takes the size of a district’s student body into account as well.

At least two of the Eagle Ford districts, Flatonia ISD and Jourdanton ISD, expect to be removed from the ranks of the newly wealthy because they educate students from other districts without charging tuition, which changes the outcome of the state’s formula.

Karnes City ISD Superintendent Jeanette Winn said she’s not sure yet whether her district will have to pay recapture.

The increasing property values are a “temporary boon” that has allowed the district to spend more on building improvements, she said.

Dobie, her counterpart in Carrizo Springs, is planning to roll millions of dollars in excess revenue into next year’s budget, in preparation for a hefty recapture payment.

But the district will still have to dip into its savings to cover the expected cost.

“It will be difficult,” Dobie said. “But overall, in general, it’s a blessing. Anyone that wants to work in Dimmit County can work, and I’m very grateful for that.”

lkastner@express-news.net

Twitter: @lkastner